Assignment Agreement: a New Addition Under the Ambit of Protected “Investment” in Investment Arbitration

By: Prajwal Totla (Jindal Global Law School, India)


‘Assignment of rights’ refers to a situation where an original investor (‘assignor’), transfers their investment along with the rights and claims associated with the investment, to a new investor (‘assignee’), through an assignment agreement. Following the assignment of rights, the assignee is deemed to be a protected investor under the concerned investment treaty, and accordingly enjoys the rights and claims equal to the original investor against the host State.

There have been objections against this recognition of assignment of rights as an accepted practice under investment-state arbitration considering its potential to be exploited as a tool for abuse of process. Thus, there is an ongoing debate as to the validity of the assignment of rights, with the presence of contrasting arbitral awards[1] and scholarly opinions[2] in this regard. This article shall attempt to add another tangent to this debate by arguing that the assignment agreement in itself amounts to a protected investment. This would make the assignee a recognized investor under an investment treaty and ultimately substantiate the need to recognise the assignment of rights.

The article would first attempt to establish that the assignment agreement qualifies as an “investment” from an objective standpoint and subsequently highlight the fulfilment of subjective requirements.


In Salini v. Morocco, the tribunal used the characteristics of an “investment” that Schreuer had proposed as an objective test to define “investment”[3], and held that an “investment” must have the following four characteristics – first, the contribution of money or assets; second, the duration of performance; third, the risks assumed by the investor; and fourth, a significant contribution to the economic development of the host State. This has become the most frequently applied test by all tribunals irrespective of their governing arbitration rules. However, the fourth characteristic, that is, contributing to the host State’s economic development has been rejected by tribunals in recent cases, where it was instead accepted that it is “a consequence and not a condition of the investment”. Thus, the objective test to define “investment” comprises the first three characteristics enumerated above.

Accordingly, the article would attempt to apply this Salini test to establish that the assignment agreement objectively qualifies as an “investment”-

(i) Contribution of money or assets – This condition requires, much like any other commercial contract, that the new investor buys the rights and associated claims from the assignor for the agreed amount of money or assets or both. In this vein, assignment agreements under their ‘payment’, ‘finances’ or similar clauses include the relevant details regarding the amount to be paid by the assignee to the assignor, the duration of payment, and the remedies available to the assignor in case of default. Thus, assignment agreements clearly exhibit the requirement of the new investor contributing the specified sum of money or assets, in order to effectively enter into and discharge the assignment agreement.

(ii) Duration of performance – The duration of performance of the investment can be measured by the operational lifetime of the investment and its associated activities. It would be incorrect to see an assignment agreement as an agreement entered on a specific date and time severed from its consequence. Instead, an assignment agreement must be seen as a ‘continuing’ investment. This is since it authorizes the new investor to exercise right and control over the investment for the remaining lifetime of the investment, which generally spans decades. Therefore, understanding the lifetime of the investment as a continuing result or consequence of the assignment agreement establishes the character of the duration of the performance.

(iii) Assumption of risk – Risk must be understood as a degree of uncertainty associated with any investment rather than a traditional limited sense of potential losses accruing from the investment. It may be argued that an assignment agreement is entered with an already existing investment and that all material information concerning the demand and profitability of the investment is available to the new investor. Hence, there might not be any uncertainty, thus showing the absence of risk.

However, this proposition would be misplaced as an assignment agreement is an agreement with the prospective application, and like any other business decision, the future profitability of any investment always has a degree of uncertainty. With variables such as regular changes in prices of inputs, the demand of output, supply-demand interplay, and so on, there is always a factor of uncertainty while investors decide whether to enter into an assignment agreement or not. Moreover, given the constant dynamic changes in the financial, environmental, and economic landscapes of any State, there is always a growing possibility of a new policy or regulation being implemented by a State, either in furtherance of a treaty obligation or to safeguard larger national interest. Hence, the existing information would at best help in making the assessment less uncertain, but will not eliminate the uncertainty altogether. Therefore, some level of risk shall remain, and this condition is also met.

Accordingly, as all the objective requirements have been argued to be satisfied, let’s shift the analysis now to the subjective requirements for the assignment agreement to qualify as an “investment”.


The subjective requirements of an investment’s definition are sui generis to every bilateral investment treaty (BIT), international investment agreement (IIA), or the multilateral investment treaty (MIT) in consideration. However, “any kind of asset, owned or controlled, directly or indirectly” – is one of the most universally recognised definitional clauses to define “investment”. Alongside several others, the Italy Model BIT 2020, Slovakia Model BIT 2019, Belgium-Luxembourg Economic Union Model BIT 2019, United States Model BIT 2012 and United Kingdom Model BIT 2008 have adopted this definition.

The phrase is constructed upon the foundation of unrestricted and inclusive terms like ‘any’, ‘asset’, ‘controlled’, ‘indirectly’, which highlights the potential for broad interpretations. Accordingly, in this part, it is argued that this definitional requirement is also met in the case of assignment agreements.

The conscious placement of the phrase “any kind”, instead of an exhaustive list of specific categories of investments establishes the host States’ acknowledgement that in the dynamic world of investments, there are always new and growing forms or modes of investments. The use of the broad term, ‘any kind’, highlights States’ commitment to facilitating cross-border investments, even if not made in the conventional or traditional sense. Given this expansive ambit and unrestricted scope of the phrase “any kind”, assignment agreements can indeed fall within the scope of “any kind of asset”, as the phrase negates any specific form requirement.

The phrase “owned or controlled” further expands the scope of protected investment to not just be limited to ‘owned’ assets but also extend to having ‘control’ over the investment. ‘Control’ in an unrestricted sense translates to having an influence in the working of investment or its decision-making or similar activity through which the investor can dictate the functioning of the investment. Therefore, as the assignee receives the right over the investment by stepping in the shoes of the assignor, the assignee becomes in charge of the management, decision-making, and exercise of the investment. Thus, even if, not owned, the investment is definitely controlled by the assignee. Furthermore, the founding principle of inserting the term ‘control’ would be defeated if investments like assignment agreements, which are not traditional ownership-based investments, were not to be recognized. In this vein, an investment in the form of an assignment agreement is protected under the ambit of ‘controlled assets’ and also is in line with the rationale of creating a broader spectrum of protected investment reflected in the phrase “owned or controlled”.

The last ingredient is another wide phrase, specifically, controlling the asset “directly or indirectly”. This further broadens the spectrum for the control or ownership of assets, to not solely be restricted to only direct control but also include indirect control by virtue of any kind of business function, means or relationship. Assignment agreements directly provide the assignee control over the investment. However, the agreement can also be seen, in a broader sense, as an indirect business transaction between the assignee and the assignor, to grant control and ownership rights of the investment to the former by virtue of the assignment agreement. In either case, this requirement would be satisfied.


The broad understanding of “investments” that this article supports is backed by the object and purpose of International Investment Law and its instruments like the BITs, IIAs or MITs. The founding principle and ethos of any Investment law treaty are ultimately to sustain, facilitate and foster cross-border investments between investors from a contracting party, investing in the respective Host state. Assignment agreements facilitate the continuation of investments in cases where the assignor becomes insolvent, chooses to disinvest in a particular host State or for similar other reasons withdraws his investment. This translates into ensuring a steady flow of foreign direct investment into the host State and increasing similar business transactions. Therefore, it submitted that the States’ aim to facilitate economic relationships is in line with the recognition of newer modes of investments such as assignment agreements. Thus, an assignment agreement must be recognised as a protected investment, as it in itself, qualifies as an “investment”, both objectively and subjectively.

[1] See, Daimler Financial Services AG v. Argentine Republic, ICSID Case No. ARB/05/1; Mihaly International Corporation v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/00/2.

[2] See, Nelson Goh, The Assignment of Investment Treaty Claims: Mapping the Principles, 10 Journal of International Dispute Settlement, (2019).

[3] Christoph Schreuer, The ICSID convention: a commentary, 2001.

(Prajwal Totla is a Third Year BBA.LLB (Hons.) student studying at Jindal Global Law School, India. He can be contacted at

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